REG - Wynnstay Group PLC - Final Results
30/01/2024 07:15
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RNS Number : 2889B Wynnstay Group PLC 30 January 2024
AIM: WYN
Wynnstay Group Plc
("Wynnstay" or the "Group" or the "Company")
Final Results
For the year ended 31 October 2023
KEY POINTS
Financial
· Much softer trading conditions compared to FY22
o farmer sentiment lower, farmgate prices down in important categories of
dairy and arable, and the significant one-off gains of FY22 were not repeated
(as expected)
· Revenue up 3% to £735.9m (2022: £713.0m)
o full year contributions from two acquisitions and record grain trading
volumes, partly offset by the normalisation of fertiliser prices from the
unsustainable, historic highs of 2022
· Adjusted operating profit* was £9.30m, including adverse stock
realisations as fertiliser raw material prices normalised (2022: £22.4m,
including significant one-off fertiliser stock gains)
· Underlying pre-tax profit* of £9.2m, including nominal, non-cash
accounting loss of £0.8m (2022: £22.6m, including significant one-off gains)
Reported pre-tax profit of £8.7m (2022: £21.1m)
· Basic earnings per share of 30.75p (2022: 82.72p)
· Net cash (excluding property leases) rose to £19.0m (2022: £18.2m)
· Net assets increased to £135.2m (2022: £130.7m)
· 20(th) consecutive year of dividend increases, with proposed final
dividend of 11.75p (2022: 11.60p) - taking total dividend for the year to
17.25p (2022: 17.00p)
Operational
· Agriculture Division - revenue of £584.3m (2022: £564.3m),
segmental profit contribution of £3.7m, including one-off adverse Glasson
fertiliser stock realisations (2022: £14.7m including significant Glasson
fertiliser stock gains)
o Glasson contended with correction in fertiliser raw material prices to
more sustainable levels, which created stock losses
o feed volumes decreased by 5.3% on a like-for-like basis, largely
reflecting lower demand from dairy and poultry sectors, respectively affected
by weaker milk prices and by Avian influenza and margin pressures
o arable activities experienced a very poor seasonally important Q4 with
prolonged wet weather significantly disrupting farmers' post-harvest
activities. Grain marketing operation, GrainLink, delivered record performance
and fertiliser demand recovered as global prices reduced but margins were
pressured
o Higher labour and energy costs impacted margins
· Specialist Agricultural Merchanting Division - revenue of £151.5m
(2022: £148.8m), segmental profit contribution of £6.1m (2022: £7.9m)
o footfall and number of transactions were in line with prior year, but
like-for-like sales decreased as lower farmer sentiment affected spending
patterns, with higher margin bagged feed and hardware sales down
· 2022 acquisitions, Humphrey Feeds and Tamar Milling, were fully
integrated
o full benefits still to come
· First phase of investment at Carmarthen feed mill was completed, with
other investments also progressing well, including installation of solar
arrays
Outlook
· Market conditions expected to remain challenging in the short-term
· Strong balance sheet and good cash generation leaves Group
well-placed to continue with its strategic growth plans and to consider
suitable acquisition opportunities
*Underlying pre-tax profit is a non-GAAP (generally accepted accounting
principles) measure and is not intended as a substitute for GAAP measures and
may not be calculated in the same way as those used by other companies. Refer
to Note 14 for an explanation on how this measure has been calculated and the
reasons for its use.
Gareth Davies, Chief Executive of Wynnstay Group plc, commented:
"Last year's results were exceptional, setting record highs driven by
substantial one-off gains, especially from soaring global fertiliser prices.
Strong farmgate prices and farmer confidence also helped to create a strong
market backdrop last year for the Group.
"This year's results were generated against much softer trading conditions,
with weaker farmer sentiment, particularly dairy and arable farmers, higher
labour and energy costs, and a weak final quarter for arable as a result of
the prolonged wet weather. As we expected, the one-off gains of 2022 did not
repeat and our fertiliser activities contended with the reversal of fertiliser
raw materials prices, which created one-off stock losses.
"Nonetheless, we made progress with the Group's investment plans and completed
the integration of our two acquisitions, Humphrey Feeds and Tamar Milling. The
full strategic benefits of these acquisitions are still to come through. We
are also delighted to highlight our twentieth year of annual dividend growth,
with our proposed final dividend.
"Trading conditions are anticipated to remain challenging in the short-term.
However, the Group's strong balance sheet and good cash flows leave us
well-placed to continue with our growth plans and to consider suitable
acquisitions."
Enquiries:
Wynnstay Group Plc Gareth Davies, Chief Executive T: 020 3178 6378 (today)
Rob Thomas, Group Finance Director T: 01691 827 142
KTZ Communications Katie Tzouliadis / Robert Morton T: 020 3178 6378
Shore Capital (Nomad and Broker) Stephane Auton / Tom Knibbs / T: 020 7408 4090
Rachel Goldstein (Corporate Advisory)
Henry Willcocks (Corporate Broking)
CHAIRMAN'S STATEMENT 2023
CHAIRMAN'S STATEMENT
Trading conditions over the financial year contrasted sharply to the prior
year. Farm gate prices were weaker across most categories and farmer sentiment
was lower as a result. The substantial one-off gains arising from
macroeconomic events that we had benefitted from last year were absent too.
The stratospheric rise in fertiliser raw material prices, which generated
significant one-off gains in 2022, returned to more normal levels over the
year. This normalisation of prices led to one-off stock losses at the Group's
fertiliser manufacturing operations, although it should be noted that these
losses were considerably less than the one-off stock gains of the previous
financial year. There were also margin challenges from higher labour,
distribution and energy costs.
While the Group was on target to achieve market forecasts for most of the
financial year, after a weak seasonally important final quarter, we reported
in November 2023 that results would be below market expectations. Underlying
Group pre-tax profit for the financial year was £9.2 million, and Group
revenue was £735.9 million. Revenue growth reflected a first full year's
contribution from both Humphrey Poultry (Holdings) Limited ("Humphrey Feeds")
and Tamar Milling Ltd following their acquisition, as well as record grain
trading volumes, in part, offset by a reduction in raw material and fertiliser
prices.
In the Agriculture Division, the integration of the two acquisitions, Humphrey
Feeds and Tamar Milling, was completed, contributing to a rise in revenue.
However, the Division's operating performance was affected by the correction
in fertiliser raw material prices, lower demand for feed, which was
experienced nationally, particularly for dairy and poultry feed, and the
disruption in post-harvest farming activities in the final quarter caused by
the prolonged wet weather. Against this challenging background, GrainLink
Limited, our grain trading operation, produced record results, helped by both
market share growth and margin expansion.
The Specialist Agriculture Merchanting Division maintained footfall and
transaction numbers, although the rise in revenue mainly reflected
agricultural inflation, and reduced volumes of own-brand bagged feed and a
decrease in hardware sales delivered an overall lower margin product mix.
Higher energy and labour costs also reduced operating profit.
Our joint ventures performed well and delivered a record contribution to Group
results.
We continued to invest across the Group in line with strategic plans. This
investment is aimed at increasing manufacturing capacity, driving efficiencies
and increased capabilities. We successfully completed the first part of our
investment at our feed mill in Carmarthen, and will be proceeding with further
investment. We also continued to focus on developing both our environmental
offering to customers, and the steps needed to attain the Group's Net Zero
ambitions. Our Renewable Energy Programme to install solar arrays started and
progressed well in its first year of roll-out, and we are involved with some
exciting environmental projects. We will be adding to our teams of on-farm
specialists, who advise farmers on how to achieve their farming objectives.
These objectives increasingly concern environmental goals as Government
support shifts to payments according to environmental outcomes.
Financial Results
Group revenue for the year to 31 October 2023 increased by 3% to £735.9
million (2022: £713.0 million). This included full year contributions from
two acquisitions, Humphrey Feeds and Tamar Milling Ltd, partly offset by the
significant correction in fertiliser prices, which returned to more normalised
levels from the historic highs recorded in 2022, following Russia's invasion
of Ukraine.
As expected, adjusted operating profit and underlying Group pre-tax profit,
the Board's alternative performance measure, both decreased significantly
year-on-year. However, after a weak final quarter, and including the nominal,
non-cash accounting loss of £0.8 million relating to the grain trading book,
adjusted operating profit was was £9.3m (2022: £22.4m, which included
significant one-off gains, in particular fertiliser stock gains) and
underlying Group pre-tax profit was £9.2 million, (2022: £22.6 million).
Further details on the non-cash accounting loss of £0.8m are provided in the
Financial Report and Notes. Reported pre-tax profit was £8.7 million (2022:
£21.1 million) and basic earnings per share was 30.75p (2022: 82.72p).
The Agricultural Division delivered sales of £584.3 million (2022: £564.3
million) and the Specialist Agricultural Merchanting sales of £151.5 million
(2022: £148.8 million). The segmental profit contribution from the
Agriculture Division was £3.7 million (2022: £14.7m), which included
contributions from joint ventures, with the Specialist Agricultural
Merchanting Division contributing £6.1 million before non-recurring items
(2022: £7.9m). Other activities generated a loss of £0.04m (2022: profit of
£0.23m).
The Group continued to generate good cash flows, and net cash generated from
operating activities was £17.2 million (2022: £10.3 million), helped by an
easing of working capital requirements as raw material prices decreased.
The Group net cash position excluding property leases at 31 October 2023 was
£19.0 million (2022: £18.2 million). This calculation excludes the
classification of land and buildings leases as debt, which is in line with the
basis that the Group's banking covenants are calculated. October remains the
highest point of net cash in the Group's annual working capital cycle.
During the financial year, 111,181 (2022: 75,891) new ordinary shares were
issued to existing shareholders exercising their right to receive dividends in
the form of new shares. The total equivalent cash amount was £0.5 million
(2022: £0.6 million). A further 503,534 shares (2022: 65,689) were issued for
a total cash consideration of £1.0 million (2022: £0.3m) to employees
exercising rights over approved share options. In the prior financial year,
1,900,000 shares were issued in a private placing to institutional holders for
a total cash consideration of £10.3 million.
Capital investment in fixed assets over the year amounted to £15.6 million
(2022: £5.3 million). Of this, £6.2 million related to renewal of property
leases (2022: nil) and £2.7 million was invested in acquisitions (2022:
£10.2 million), including deferred consideration.
The balance sheet remains very robust. Group net assets at the financial
year-end increased to £135.2 million (2022: £130.7 million). Based on the
weighted average number of shares in issue during the financial year of
22.525m (2022: 20.722m), this equates to a net asset per share of £6.00
(2022: £6.31 per share). Return on net assets from underlying pre-tax profit
was 7.0% (2022: 17.4%).
Dividends
The Board is pleased to propose an increased final dividend of 11.75p per
share (2022: 11.60p). This together the interim dividend of 5.50p per share,
paid on 31 October 2023, takes the total dividend for the year of 17.25p
(2022: 17.00p), a 1.5% rise on the previous financial year. Subject to
shareholder approval, the final dividend will be paid on 30 April 2024 to
shareholders on the register as at 2 April 2024.
This is the 20th consecutive year of dividend growth change since 2004, when
Wynnstay joined AIM. It is covered 1.8 times by profit after tax (2022: 4.1
times) and continues the Board's progressive dividend policy.
ESG
The business is committed to reaching Net Zero by 2040 and we are making good
early steps towards this aim. The 2023 Annual Report and Accounts will include
our first Task Force on Climate-related Financial Disclosures ("TCFD") report,
and we have brought in external expertise and established additional internal
groups as we further develop our Net Zero roadmap. We also commenced a
significant investment programme in solar energy, which continues in the new
financial year and beyond.
Our ESG programme is much wider than our own Net Zero ambitions. It also
encompasses our objective to assist our farmer customers as they increasingly
focus on environmental and biodiversity goals. The transition period from
payments based on the EU's Common Agricultural Policy (CAP) to a new system of
financial support based on environmental outcomes is driving change across UK
farms. Wynnstay's on-farms teams provide advice and guidance on the innovative
products and services the Group offers, including our expanding environmental
seeds offering.
As we deepen our environmental expertise and offerings, we are widening our
links. In particular, I am pleased to highlight two exciting projects in which
Wynnstay is involved. The first is the 'Dancing with Daffodils' research
project. This is a revolutionary research project, supported by the department
of Farming, Environment and Rural Affairs and Innovate UK, which is trialing
the use of daffodils to reduce cattle methane emissions. If successful,
Wynnstay would be the route-to-market for the new product. The second project
is one with Harper Adams University, which is exploring ways to grow soya
beans in the UK.
We continue to host specialist agricultural events for farmers, including the
Arable Event, and Beef and Sheep Event.
Board and Colleagues
On behalf of the Board, I would like to thank our very dedicated people for
their hard work over the year. They provide customers with excellent service,
and my fellow directors and I are very pleased to acknowledge their vital
contribution to the Group's success.
There have been two changes to the Board's composition during the financial
year. Steven Esom was appointed as Senior Independent Non-executive Director
and head of the Renumeration Committee on 18 April 2023. He replaced Philip
Kirkham who retired on 24 May 2023, after 10 years as a Board member. Steven
has extensive senior-level experience in the UK food and retailing industries
and significant experience of the UK agricultural sector. He was Managing
Director of Waitrose & Partners, where he regularly engaged with farmers
and was involved with the oversight of Waitrose-owned farmlands. He was also
Executive Director of Food at Marks & Spencer, and held senior commercial
buying roles at J Sainsbury plc for 12 years as well as at Texas, the DIY
retailer, then part of Ladbroke Group. Steven also holds three other
non-executive directorships. He is Chairman of Sedex, a leading global supply
chain consultancy focused on environmental, social and governance ("ESG")
outcomes. He is also Chairman of Andrews & Partners Ltd, the residential
estate agency and lettings and management group, and Chairman of Advantage
Travel Partnership, the UK's largest independent travel agent group.
In July 2023, we announced that Paul Roberts, Finance Director, was retiring
after 36 years with Wynnstay. We subsequently appointed Rob Thomas, FCA, as
Group Finance Director designate, and Rob joined the Group in this role on 2
October. On 2 January 2024, Rob took over fully from Paul after a very smooth
handover process. Paul continues to assist in a consultancy capacity while the
year-end audit process completes.
Rob Thomas has significant financial and commercial experience in senior
roles, including in the agricultural and the supply chain sectors. He joined
Wynnstay from EFS Global Limited, the UK-based logistics provider, where he
was Group Finance Director. Before that, he worked at NWF Group plc, the
specialist distributor of fuel, food and feed, for eight years until 2022. For
the majority of his time there, he was Finance Director of the feeds division,
NWF Agriculture Limited, which manufactures and supplies animal feeds to
livestock farmers across the UK. He has significant experience of M&A and
strategic planning. Rob's earlier career was in accountancy with PwC, both in
the UK and overseas.
I take this opportunity to welcome Rob to Wynnstay and to pay tribute to the
outstanding contribution that Paul has made to the business over his long year
career. Paul joined the Board in 1997 and has managed the Group's finances in
an exemplary manner over this time.
Outlook
In November 2023, the Board reported that with uncertainty over milk and other
farm-gate prices, farmer sentiment is likely to remain cautious in the
short-term. We expect this to remain the case. However, with our strong
market position, good cash flows and very robust balance sheet, the Board
believes that the Group is well-positioned as we continue with our strategic
growth plans and investments, which will further strengthen our position in
the market. We continue to review acquisition opportunities that fit our
strategic criteria.
Steve Ellwood
Chairman
CHIEF EXECUTIVE'S REPORT
INTRODUCTION
Trading conditions over the financial year were markedly different from the
prior financial year, when the Group benefited from substantial one-off gains,
as well as strong farmgate prices, to deliver a record set of results. By
contrast, in the financial year under review, farmgate prices were lower
across most categories, impacting farmer sentiment and spending. In addition,
the global correction in fertiliser raw material prices, which moved back to
more normalised levels, created one-off stock losses for Glasson Grain Ltd.
This represented the opposite picture to last year's one-off gains when
fertiliser raw material prices soared to historic highs following Russia's
invasion of Ukraine. For context, last year's one-off gains were significantly
greater than this financial year's one-off losses. Inflation also remained a
factor for the Group, affecting labour, distribution and packaging costs in
particular.
The trading backdrop in the second half of the financial year was weaker than
the first half. Farm gate prices moved lower, especially for milk and grain.
In addition, the Group's arable activities suffered from the very wet autumn
in a seasonally important period, with heavy rains reducing the grain harvest
and disrupting post-harvest farming activities, particularly winter cereal
seed planting.
More positively, GrainLink, the Group's specialist crop marketing business,
delivered record annual results. This was driven by increased volumes of grain
purchased, helped by market share gains in the eastern side of its trading
area and good margin retention. This record performance was even after the
recognition of a non-cash nominal accounting loss.
Both our acquisitions, Humphrey Feeds and Tamar Milling, have now been fully
incorporated into the business, and contributed positively to the performance
of the Group. Unlike Tamar Milling though, the performance of Humphrey Feeds
was below our expectations. The business was affected by the challenges
experienced by the free range sector, driven by Avian influenza and weaker
prices. However, the sector is recovering, stimulated by higher egg prices.
The first phase of our investment at Carmarthen feed mill is now complete, and
we are considering the most viable and sustainable options for replacing the
feed volumes that we currently manufacture at Twyford.
Our Joint Ventures and associate business together delivered an above-expected
performance, helped by record trading at Bibby Agriculture Ltd and positive
contributions from WYRO and Total Angling Ltd.
We continued to make good progress with our ESG strategy, both internally and
in relation to our farmer customers whose financial support mechanisms are now
increasingly linked to environmental outcomes. In England approximately 50% of
the previous Basic Farm Payment under the Common Agricultural Policy is moving
to Environmental Land Management ("ELMs") schemes by 2024, and the devolved
administrations will shape their respective support schemes from 2025.
REVIEW OF AGRICULTURAL ACTIVITIES
AGRICULTURE DIVISION
The Agriculture Division manufactures and processes a wide range of
agricultural inputs, including feeds, fertiliser and seeds, which cater for
the needs of both livestock and arable farmers. Glasson Grain Limited
("Glasson"), whose operations include fertiliser blending, and GrainLink, the
Group's crop marketing business, also report within this Division.
Divisional revenue increased by 3.6% year-on-year to £584.3 million (2022
£564.3 million) and the segmental contribution was £3.7 million (2022:
£14.7 million). Revenue was boosted by full-year contributions from the
Humphreys Feeds and Tamar Milling acquisitions, as well as by increased
activity at GrainLink Limited. However, operating profit was impacted by a
number of factors: the reversal in fertiliser raw material prices, which
impacted Glasson; the weaker free range egg sector, which suffered from the
outbreak of Avian Influenza and margin pressures; and the difficult final
quarter, when prolonged wet weather impacted arable activities.
Feed
Wynnstay manufactures and supplies a wide range of feeds and animal nutrition
products for a range of sectors, including dairy, beef, sheep, and poultry.
The business operates three feed mills and three blending plants, and offers
nutrition products in compounded, blended and meal forms, both in bulk and in
bags. This wide offering provides an internal hedge against sector variations.
Bagged feed is predominantly marketed under our "Wynnstay brand" and sold
through our depot network.
Feed volumes on a like-for-like basis were 5.3% below the previous year. This
decrease largely reflected reduced demand from the dairy sector, as a result
of weaker milk prices, and from free range poultry farmers, who were still
recovering from Avian influenza and also contending with reduced margins. The
early spring and an abundance of grass in the summer months were also factors
dampening demand. Efficiency initiatives have helped mitigate inflation-driven
costs, which were especially evident in labour, distribution and packaging
costs. As we move through the early months of the new financial year, with
milk prices still low, we expect demand from the dairy farmers to remain
suppressed.
The integration of the two acquisitions, Humphrey Feeds (purchased in March
2022) and Tamar Milling (purchased in November 2022), into the Group's wider
activities, was completed. Our offering to the free range egg sector has been
rebranded as 'Wynnstay Humphrey Feeds and Pullets', and the respective sales
teams combined. This has created greater efficiencies in both feed
manufacturing and distribution. Whilst the Humphrey Feeds acquisition
contributed positively to the Group's overall performance, its performance was
below our expectations. This reflected the challenges of the free range egg
sector, including the organic egg sub-sector, with a number of producers
exiting the marketplace. However, the more recent onset of higher free range
egg prices has stimulated confidence in the sector and acted as a boost to
recovery. Tamar Milling performed above management expectations in its first
full year contribution. The full potential of these acquisitions is still to
come through.
Our investment to expand the feed manufacturing capacity of our mill at
Carmarthen and to improve its operational efficiencies progressed well over
the year. Phase one, which included the installation of a bank of blended feed
out-loading bins, has been completed. The second phase of investment is
scheduled to commence, and the feed mill is now also being evaluated as we
consider the most commercially optimal solutions for replacing the
manufacturing facility currently in use at Twyford.
Our on-farm animal nutrition advisors continued to work very effectively with
customers to help them improve performance efficiency and deliver their
environmental objectives and respond to market demands. We continue to focus
on keeping abreast of the latest scientific developments and aim to further
strengthen our teams of specialists across all sectors in support of our
growth plans.
Arable Products
Our arable operations supply a wide range of services and products to arable
and grassland farmers. These include seeds, fertilisers and agrochemicals as
well as grain marketing services.
We saw significant variations in performance within the arable division.
GrainLink, our grain and combinable crop marketing business delivered record
results, which were well ahead of management expectations. This resulted from
a 30% increase in grain marketing volumes and good margin retention. GrainLink
continued to gain market share on the eastern side of the trading area. As we
detail in the Financial Report, GrainLink's headline performance was impacted
by the accounting treatment of financial derivatives. It should be noted that
this results only from the application of International Financial Reporting
Standard 9 and is a non-cash charge.
The final quarter of the financial year is a seasonally important period for
arable activities, and weather conditions were challenging. The very wet
summer and heavy rains in the autumn reduced the harvest size, and its
quality, and created very difficult autumn sowing conditions. Land intended
for autumn sowing has not been sown, impacting sales of winter cereal seed,
and some of the crop seed that was sown was flood damaged. In addition, some
of the decrease in winter cereal seed sales also reflected our decision to
exit from some low-margin wholesale contracts.
While we anticipate that demand for spring sown cereal and environmental seed
mixtures will increase, as a result of reduced autumn sowings, there are
difficulties in the availability of spring seed this season, following the
poorer 2023 harvest yields.
Volumes of traditional grass seed mixtures were also impacted by the weather
and were 5% lower year-on-year. However, this was better than the national
trend, which showed an annual decrease of 10%. Sales of our environmental seed
mixtures grew strongly as farmers adjusted and changed cropping rotations, in
line with opportunities to participate in the Government's Environmental Land
Management Schemes. We expect demand for these environmental seed mixtures to
continue to increase. Our team of specialist advisors can offer customers
environmentally-friendly seed mixtures that include pollinators, deep-rooted
herbs and wildflowers. Demand for root seeds has also increased as sheep
farmers grow more crops to reduce bought-in feed and participate in
environmental schemes.
The completion of our investment at our seed plant at Astley in Shropshire
will enable us to double grass seed processing and provides a platform to
continue to increase sales in the future. It also enhances our reputation for
high-quality seeds.
Merchanted fertiliser volumes in the second half of the year were stronger
than in the first half and overall sales were up by 2% on the prior year. This
was significantly better than the estimated national decrease in volumes of c.
10%. As fertilizer prices reduced from the higher levels earlier in the year,
demand improved, however margins were affected in a falling market.
Farmer returns within the arable sector have been squeezed in comparison to
the very strong prior year, when grain supplies were disrupted following the
invasion of the Ukraine by Russia and prices climbed to record highs. While
the reduced acreage that has been sown this autumn will impact the demand for
crop inputs, including fertiliser, farmers will plant alternative crops, which
will require our products and services.
Glasson Grain Limited
Glasson Grain is the second largest fertiliser blender in the UK and is based
at Glasson Dock near Lancaster. As well as fertiliser blending, Glasson has
two other core activities, the supply of feed raw materials and the
manufacture of added-value animal feed products.
As we reported with first-half results, Glasson contended with the sharp
reversal of global fertiliser raw material prices, from the unsustainable
levels of the prior year, to more normalised levels. In the last financial
year, the stratospheric rise in raw material prices led to significant one-off
gains; by contrast, in this financial year, Glasson's performance has been
distorted by adverse stock realisations. As a fertiliser manufacturer, Glasson
carries stocks of raw materials for blending and therefore can be affected by
price movements, up and downwards. Fertiliser prices continued their
correction in the second half of the financial year and retained a degree of
volatility in the autumn period.
Overall, Glasson's fertiliser volumes decreased by 4% year-on-year, although
it increased its market share. We anticipate that fertiliser usage will change
as farmers switch increasingly to precision application techniques, stimulated
by Government-supported environmental schemes. As farmers shift their
approach and carry out more detailed nutrient management plans to identify
crop requirements, Glasson is well-placed to assist, having the ability to
process bespoke fertilisers to suit individual customer requirements. We
anticipate opportunities to add value to the business in the coming years, and
expect to maintain our position as the UK's second largest manufacturer of
blended fertiliser.
Feed raw materials performed well and ahead of expectation. Although volumes
decreased by 11%, which was in line with national trends, margins were better
than last year and drove strong results. Glasson's smaller operation, the
specialist animal feed activity, saw lower volumes as the cost-of-living
crisis reduced consumer demand for some of the manufactured products. Higher
energy and labour costs also put pressure on margins. We are currently
restructuring the operation to mitigate costs.
SPECIALIST AGRICULTURAL MERCHANTING DIVISION
The Specialist Agricultural Merchanting Division comprises a network of 53
depots catering mainly for the needs of farmers but also rural dwellers.
Depots are mostly located within the livestock areas of England and Wales. The
network is supported by a multi-channel sales route to market, which includes
a digital sales platform, a sales trading desk and specialist catalogues.
Youngs Animal Feeds ("Youngs") is also accounted for in this division. Youngs
manufactures and distributes a wide range of equine products, which are sold
through three dedicated Youngs outlets, Wynnstay depots and via third-party
wholesale customers.
Revenue in the division increased to £151.5 million (2022: £148.8 million).
However, this rise mostly reflected agricultural inflation, while segmental
contribution decreased to £6.1 million (2022: £7.9 million), which was below
management expectations. Footfall and the number of transactions were in line
with the previous year, but an overall lower margin product mix had an impact
on profitability. In particular, we felt the effect of lower volumes of our
own-brand bagged feed and lower hardware sales. This shift in buying patterns
reflected subdued farmer sentiment, as farmers tightened their belts in
response to lower farm gate prices, and the good availability of grass in the
second half also had an effect on feed volumes. In addition, rising energy and
labour costs affected the Division's cost base and we have put in place
actions to mitigate this.
We continue to develop our digital offering. The number of customers who have
signed up to our digital portal continued to increase. The majority of the
activity on the portal remains non-trading and accounts related. During the
coming year, we will be introducing a click-and-collect service as we continue
to develop our online offering.
Youngs Animal Feeds saw an increase in sales of its own- manufactured fibre
product, 'Sweet Meadow' and performed ahead of last year.
JOINT VENTURES AND ASSOCIATE COMPANIES
Wynnstay has three joint venture companies, Bibby Agriculture Ltd, WYRO
Developments Limited and Total Angling Limited, as well as an associate
company, Celtic Pride Limited. The businesses together made another strong
contribution, which totalled £0.9 million (2022 £0.8 million). This was
driven by a record performance from Bibby Agriculture Limited, as well as
positive contributions from WYRO and Total Angling Limited.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE ("ESG")
Our ESG strategy has two goals. As an organisation, Wynnstay is working
towards becoming carbon neutral by 2040. We are committed to helping to
protect the local and global environments, and aim to minimise, as much as we
can, any adverse environmental impacts that our activities may have. Alongside
this, we are focused on helping farmers to feed the UK in a more sustainable
way, providing advice and access to more environmentally-friendly agricultural
inputs and other innovative products.
In the last financial year, we established The Sustainable Farm Advisory Team.
The team includes industry experts, and the objective is to bring in
additional expertise to help guide the decisions of our Executive Management
and our Sustainability Team as they develop our environmental strategies. We
have recently formed the Resource Efficiency Action Team, which has been
tasked with accelerating resource efficiency gains across the Group.
In order to reduce Group energy costs and its carbon footprint, we have
invested £1.0m in solar voltaic panels and will be investing a further £1.0m
over the new financial year to install solar panels on roofs of Group
properties. The Group's vehicle replacement policy is now reshaping the
vehicle fleet with electric/hybrid cars and lorries that are more fuel
efficient.
We continue to work with the wider industry and customers on carbon and
methane reduction projects. During the year, Wynnstay, along with other
partners from the industry, launched the revolutionary "Dancing with
Daffodils". The project is investigating the potential use of a daffodil
extract to reduce methane emissions from cows. A 96% reduction in methane
emissions has been demonstrated in artificial cow stomachs and a team of
researchers at Scotland's Rural College is now trialling the extract's use in
real cows. The research team believes that the daffodil extract, when added to
livestock feed, could reduce methane emissions by at least 30%. A four-year
programme of trials has begun at farms across the UK, and if they prove
successful, it is intended that Wynnstay provides the route-to-market for the
end-product. Whilst we already offer methane inhibitors within our
climate-friendly range of feed products, this potential new product would
represent a significant step forward in reducing methane emissions from
ruminant animals.
In line with our environmental commitments and to address concerns about
poultry manure and phosphate levels in rivers, we introduced a lower
phosphorus feed option for free range layer hens. The new feed formula,
which optimises the level of the phytase enzyme without compromising feed
performance or bird health, improves diet utilisation and results in an
average reduction of 13.8% in in phosphate excretion per bird per year. All of
Wynnstay's relevant manufactured layer mashes now contain optimised doses of
phytase.
Our colleagues remain of paramount importance, and we work hard to encourage
dialogue and engagement throughout the Group, including the contribution of
ideas as to how to improve the business, workplace and performance. The
Colleagues Ideas Hub was established as a means by which staff can submit
their ideas. If an idea is taken up and shown to be successful, we also
provide financial recognition. The Executive Team regularly updates colleagues
across the Group on the Company's progress, with both the Team and colleagues
benefiting from this regular engagement. We also support colleagues'
fundraising initiatives. Fundraising proceeds are distributed to nominated
charities, principally Children with Cancer and The Royal Agricultural
Benevolent Institution (RABI), the award-winning charity which provides local
support to the farming community in England and Wales.
COLLEAGUES
I would like to take this opportunity to thank all our colleagues for their
continued hard work, loyalty and commitment over the past twelve months. They
have risen to the challenge of a more difficult trading environment and
continued to demonstrate Wynnstay's values and serve our customers well. I am
proud of working alongside them.
I would also like to add my personal thanks to Paul Roberts, who retired as
Finance Director, on 2 January 2024 after a long and successful career at
Wynnstay. It has been a great pleasure to work with him, and I join my
colleagues in acknowledging his outstanding contribution to the Group.
OUTLOOK
The trading backdrop remains difficult. Farmer sentiment is cautious,
reflecting uncertainty over farmgate prices and the adjustment to the
Environmental Land Management Scheme and the Sustainable Farming Scheme. We
anticipate current low milk prices to continue to suppress dairy feed demand,
although some recovery is expected in the coming months, and arable inputs are
likely to be down in the spring, following the significant reduction in autumn
cereal planting. It is also reasonable to expect a smaller 2024 harvest.
Energy and labour costs remain factors too.
While these are challenges for the entire sector in the short term, Wynnstay's
strong balance sheet and good cash generation enable us to continue to invest
across the business in support of our growth plans, and to consider
acquisitions. The Group is well-placed in the marketplace and its balanced
business model helps to smooth sector variations and remains a strength.
Gareth Davies
Chief Executive Officer
WYNNSTAY GROUP PLC
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 October 2023
2023 2022
Note £000 £000 £000 £000
Revenue 2 735,877 713,034
Cost of sales (656,829) (622,228)
Gross profit 79,048 90,806
Manufacturing, distribution and selling costs (60,060) (59,386)
Administrative expenses (10,020) (9,307)
Other operating income 371 335
Adjusted operating profit(1) 9,339 22,448
Amortisation of acquired intangible assets and share-based payment expense 4 (468) (416)
Non-recurring items 4 (82) (1,094)
Group operating profit 8,789 20,938
Interest income 528 166
Interest expense (1,286) (656)
3 (758) (490)
Share of profits in joint ventures and associates accounted for using the 865 808
equity method
Share of tax incurred by joint ventures and associates (192) (132)
6 673 676
Profit before taxation 8,704 21,124
Taxation 7 (1,776) (3,982)
6,928 17,142
Profit for the year
Other comprehensive income / (expense)
Items that will be reclassified subsequently to profit or loss:
- Net change in the fair value of cashflow hedges taken to equity, 49 (2,462)
net of tax
- Recycle cashflow hedge to income statement (83) 2,336
Other comprehensive expense for the period (34) (126)
Total comprehensive income for the period 6,894 17,016
Basic earnings per share 9 30.75p 82.72p
Diluted Earnings per 9 30.31p 80.65p
share
(1)Adjusted operating profit are after adding back amortisation of acquired
intangible assets, goodwill impairment, share-based payment expense and
non-recurring items.
WYNNSTAY GROUP PLC
CONSOLIDATED BALANCE SHEET
As at 31 October 2023 2023 2022
Note £000 £000
NON-CURRENT ASSETS
Goodwill 15,530 16,133
Intangible assets 4,960 4,936
Investment property 1,850 1,850
Property, plant and equipment 24,598 20,840
Right-of-use assets 14,129 8,202
Investments accounted for using equity method 4,407 4,101
Derivative financial instruments 54 1
65,528 56,063
CURRENT ASSETS
Inventories 55,456 71,095
Trade and other receivables 81,276 96,575
Financial assets - loan to joint ventures 639 1,067
Cash and cash equivalents 11 31,055 31,177
Derivative financial instruments 209 598
168,635 200,512
TOTAL ASSETS 234,163 256,575
CURRENT LIABILITIES
Financial liabilities - borrowings 11 (2,595) (3,043)
Lease liabilities 11 (3,762) (3,344)
Trade and other payables (75,694) (105,015)
Current tax liabilities (257) (1,639)
Provisions - (345)
Derivative financial instruments (432) (53)
(82,740) (113,439)
NET CURRENT ASSETS 85,895 87,073
NON-CURRENT LIABILITIES
Financial liabilities - borrowings 11 (4,743) (6,640)
Lease liabilities 11 (9,213) (3,999)
Trade and other payables (9) (36)
Derivative financial instruments (8) (80)
Deferred tax liabilities (2,219) (1,680)
(16,192) (12,435)
TOTAL LIABILITIES (98,932) (125,874)
NET ASSETS 135,231 130,701
EQUITY
Share capital 10 5,739 5,585
Share premium 43,482 42,130
Other reserves 4,080 4,267
Retained earnings 81,930 78,719
TOTAL EQUITY 135,231 130,701
WYNNSTAY GROUP PLC
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
As at 31 October 2023
Share premium account Other reserves Cashflow
Share hedge Retained
capital reserves earnings Total
Group £000 £000 £000 £000's £000 £000
At 1 November 2021 5,075 31,600 3,868 263 64,916 105,722
Profit for the year - - - - 17,142 17,142
Net change in the fair value of cashflow hedges taken to equity, net of tax
- - - (2,462) - (2,462)
Recycle cashflow hedge to income statement
- - - 2,336 - 2,336
Total comprehensive income for the year
- - - (126) 17,142 17,016
Transactions with owners of the Company, recognised directly in equity:
Shares issued during the year 510 10,530 - - - 11,040
Dividends - - - - (3,339) (3,339)
Equity settled share-based payment transactions
- - 262 - - 262
Total contributions by and distributions to owners of the Company
510 10,530 262 - (3,339) 7,963
At 31 October 2022 5,585 42,130 4,130 137 78,719 130,701
Profit for the year - - - - 6,928 6,928
Net change in the fair value of cashflow hedges taken to equity, net of tax
- - - 49 - 49
Recycle cashflow hedge to income statement
- - - (83) - (83)
Total comprehensive income for the year
- - - (34) 6,928 6,894
Transactions with owners of the Company, recognised directly in equity
Shares issued during the year 154 1,352 - - - 1,506
Dividends - - - - (3,868) (3,868)
Own share acquired by ESOP trust - - (225) - - (225)
Equity settled share-based payment transactions
- - 258 - - 258
Recycle of equity remuneration reserves - - (186) - 151 (35)
Total contributions by and distributions to owners of the Company
154 1,352 (153) - (3,717) (2,364)
At 31 October 2023 5,739 43,482 3,977 103 81,930 135,231
WYNNSTAY GROUP PLC
CONSOLIDATED CASH FLOW STATEMENT
For the year ended 31 October 2023
2023 2022
Note £000 £000
Cash flows from operating activities
Cash generated from operations 12 20,272 13,839
Interest received - cash 3 528 166
Interest paid - cash 3 (822) (399)
Tax paid (2,763) (3,342)
Net cash generated from operating activities 17,215 10,264
Cash flows from investing activities
Proceeds from sale of property, plant and equipment 256 264
Purchase of property, plant and equipment (5,761) (3,560)
Acquisition of business and assets, net of cash acquired - (98)
Acquisition of subsidiary undertaking, net of cash acquired 13 (2,709) (10,136)
Receipt of repayment of short-term loans to joint ventures 428 2,252
Payment of short terms loan to ESOP trust (195) -
Disposal of investments - 7
Dividends received from joint ventures and associates 367 4
Net cash used by investing activities (7,614) (11,267)
Cash flows from financing activities
Net proceeds from the issue of ordinary share capital 1,471 11,040
Proceeds from new loans 26 9,485
Lease repayments (5,042) (4,229)
Repayment of borrowings (2,371) (474)
Dividends paid to shareholders 8 (3,868) (3,339)
Net cash generated (used in) / from financing activities (9,784) 12,483
Net (decrease) / increase in cash and cash equivalents (183) 11,480
Effects of exchange rate changes 61 56
Cash and cash equivalents at the beginning of the period 31,177 19,641
Cash and cash equivalents at the end of the period 11 31,055 31,177
WYNNSTAY GROUP PLC
NOTES TO THE ACCOUNTS
1. GENERAL INFORMATION AND SIGNIFICANT ACCOUNTING POLICIES
The Company is taking advantage of the exemption in s408 of the Companies Act
2006 not to present its individual income statement and related notes that
form part of this approved financial information.
Basis of Preparation
The Group's financial statements have been prepared in accordance with
international accounting standards in accordance with UK-adopted International
Accounting Standards and applicable law. The Group financial statements have
been prepared under the historical cost convention other than certain assets
which are at deemed cost under the transition rules, share-based payments
which are included at fair value and certain financial instruments which are
explained in the relevant section below. A summary of the material Group
accounting policies, which have been applied consistently, is set out below.
The preparation of financial statements in accordance with UK-adopted
International Accounting Standards requires the use of certain critical
accounting estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements, and the
reported amounts of revenues and expenses during the reporting period.
Although these estimates are based on management's best knowledge of the
amount, event or actions, actual results ultimately may differ from those
estimates.
Going Concern
The directors have prepared the financial information presented for Group and
Company on a going concern basis having considered the principal risks to the
business and the possible impact of plausible downside trading scenarios. The
Board has concluded that they have a reasonable expectation that the entity
has adequate resources to continue in operational existence for the
foreseeable future. The Group's business activities, together with the factors
likely to affect its future development, performance and position are set out
in the Strategic Report of the Group's Annual Report. The financial position
of the Group and the principal risks and uncertainties are also described in
the Strategic report.
The Group has a sound financial base and forecasts that show profitable
trading and sufficient cash flow and resources to meet the requirements of the
business, including compliance with banking covenants and on-going liquidity.
In assessing their view of the likely future financial performance of the
Group, the Directors consider industry outlooks from a variety of sources, and
various trading scenarios. This analysis showed that the Group is well placed
to manage its business risks successfully despite the current uncertain
economic outlook. More detail on the outlook is contained within the Group's
Annual Report.
In conclusion, the Directors have a reasonable expectation that the Group has
adequate resources to continue in operational existence for the foreseeable
future. Thus, they continue to adopt the going concern basis of accounting in
preparing the annual financial statements.
2. SEGMENTAL REPORTING
IFRS 8 requires operating segments to be identified on the basis of internal
financial information about the components of the Group that are regularly
reviewed by the chief operating decision maker ("CODM") to allocate resources
to the segments and to assess their performance.
The chief operating decision maker has been identified as the Board of
Directors (" the Board"). The Board reviews the Group's internal reporting in
order to assess performance and allocate resources. The Board has determined
that the operating segments, based on these reports are Agriculture,
Specialist Agricultural Merchanting and Other.
The Board considers the business from a product/service perspective. In the
Board's opinion, all of the Group's operations are carried out in the same
geographical segment, namely the United Kingdom.
Agriculture - manufacturing and supply of animal feeds, fertiliser, seeds and
associated agricultural products.
Specialist Agricultural Merchanting - supplies of a wide range of specialist
products to farmers, smallholders, and pet owners.
Other - miscellaneous operations not classified as Agriculture or Specialist
Agricultural Merchanting.
The Board assesses the performance of the operating segments based on a
measure of operating profit. Non-recurring costs and finance income and costs
are not included in the segment result that is assessed by the Board. Other
information provided to the Board is measured in a manner consistent with that
in the financial statements. No segment is individually reliant on any one
customer.
All revenue during the year has arisen from revenue recognised at a point in
time, and there were no revenues from transactions in 2023 or 2022 with
individual customers which amounted to 10% or more of Group revenues.in that
period.
The segment results for the year ended 31 October 2023 are as follows:
Year ended 31 October 2023 Agriculture Specialist Agricultural Merchanting Other Total
£000 £000 £000 £000
Revenue from external customers 584,313 151,475 89 735,877
Segment result
Group operating profit before non-recurring items 2,849 6,101 (79) 8,871
Share of results of joint ventures before tax 802 27 36 865
3,651 6,128 (43) 9,736
Non-recurring items (82)
Interest income 528
Interest expense (1,286)
Profit before tax from operations 8,896
Income taxes (includes tax of joint ventures and associates) (1,968)
Profit for the year attributable to equity shareholders from operations 6,928
Other Information:
Depreciation and amortisation 3,922 2,565 14 6,501
Non-current asset additions 11,747 5,107 5 16,859
Segment assets 129,542 71,541 3,820 204,903
Segment liabilities (57,306) (20,632) - (77,938)
126,965
Add corporate net cash (note 11) 10,742
Less corporate tax liabilities (2,476)
Net assets 135,231
Included in the segment assets above are the following investments in joint 3,105 136 1,078 4,319
ventures and associates
The segment results for the year ended 31 October 2022 are as follows:
Year ended 31 October 2022 Agriculture Specialist Agricultural Merchanting Other Total
£000 £000 £000 £000
Revenue from external customers 564,263 148,771 - 713,034
Segment result
Group operating profit before non-recurring items 14,108 7,939 (15) 22,032
Share of results of joint ventures before tax 553 8 247 808
14,661 7,947 232 22,840
Non-recurring items (1,094)
Interest income 166
Interest expense (656)
Profit before tax from operations 21,256
Income taxes (includes tax of joint ventures and associates) (4,114)
Profit for the year attributable to equity shareholders from operations 17,142
Other Information:
Depreciation and amortisation 3,772 2,591 12 6,375
Non-current asset additions 13,490 1,260 - 14,750
Segment assets 146,008 75,099 4,212 225,319
Segment liabilities (80,906) (24,544) - (105,450)
119,869
Add corporate net cash (note 11) 14,151
Less corporate tax liabilities (3,319)
Net assets 130,701
Included in the segment assets above are the following investments in joint 2,746 117 1,150 4,013
ventures and associates
3. FINANCE COSTS
2023 2022
£000 £000
Interest expense:
Interest payable on borrowings (822) (399)
Interest payable on finance leases (464) (257)
Interest and similar charges payable (1,286) (656)
Interest income from banks deposits 317 66
Interest income from customers 211 100
Interest receivable 528 166
Finance costs (758) (490)
4. AMORTISATION OF ACQUIRED INTANGIBLE ASSETS, IMPAIRMENT OF
GOODWILL, SHARE-BASED PAYMENTS AND NON-RECURRING ITEMS
2023 2022
£000 £000
Amortisation of acquired intangible assets and share-based payments
Amortisation of intangibles 210 154
Cost of share-based reward 258 262
468 416
Non-recurring items
Business combination costs 28 572
Business reorganisation costs 54 -
Fair value movement in Investment property - 522
82 1,094
Non-recurring items consisted of:
in 2023:
• Business combination expenses in relation to the acquisition of Tamar Milling
Limited in November 2022.
• Business reorganisation expenses made during the year at Glasson Grain
Limited.
In 2022:
• Business combination expenses in relation to the acquisition of Humphreys
Poultry (Holdings) Limited in March 2022.
• The fair value change in investment property followed a professional valuation
carried out by BNP Paribas Real Estate in July 2022.
5. GROUP OPERATING PROFIT
The following items have been included in arriving at operating profit:
2023 2022
£000 £000
Staff costs 38,430 37,724
Cost of inventories recognised as an expense 646,673 617,170
Depreciation of property plant and equipment:
- owned assets 2,312 2,290
Amortisation of right-of-use assets 4,189 4,085
Amortisation of intangibles 210 154
Fair value losses / (gains) on derivative financial instruments 809 (627)
Hedge ineffectiveness for the period (50) 104
(Profit) on disposal of fixed assets (121) (132)
Loss / (Profit) on disposal of right of use assets 2 (86)
Other short term and low value lease rental payments 323 349
Services provided by the Group's auditor
During the year the Group obtained the following services from the Group's
auditor:
2023 2022
£000 £000
Audit services - statutory audit 225 175
6. SHARE OF POST-TAX PROFITS OF JOINT VENTURES
2023 2022
£000 £000
Total share of post-tax profits of joint ventures 673 676
7. TAXATION
2023 2022
Analysis of tax charge in year £000 £000
Current tax
- Operating activities 1,474 3,627
- Adjustments in respect of prior years (93) 136
Total current tax 1,381 3,763
Deferred tax
- Accelerated capital allowances 438 (76)
- other temporary and deductible differences (43) 295
Total deferred tax 395 219
Tax on profit on ordinary activities 1,776 3,982
8. DIVIDENDS
2023 2022
£000 £000
Final dividend paid for prior year 2,608 2,134
Interim dividend paid for current year 1,260 1,205
3,868 3,339
Subsequent to the year end it has been recommended that a final dividend of
11.75p per ordinary share (2022: 11.60p) be paid on 30 April 2024. Together
with the interim dividend already paid on 31 October 2023 of 5.50p net per
ordinary share (2022: 5.40p) this will result in a total dividend for the
financial year of 17.25p net per ordinary share (2022: 17.00p).
9. EARNINGS PER SHARE
Basic earnings per share Diluted earnings per share
2023 2023
2022 2022
Earnings attributable to shareholders (£000) 6,928 17,142 6,928 17,142
Weighted average number of shares in issue during the year (number '000) 22,525 20,722
22,853 21,254
Earnings per ordinary 25p share (pence) 30.75 82.72 30.31 80.65
Basic earnings per 25p ordinary share is calculated by dividing profit for the
year from continuing operations attributable to ordinary shareholders by the
weighted average number of ordinary shares in issue during the year.
For diluted earnings per share, the weighted average number of ordinary shares
is adjusted to assume conversion of all dilutive potential ordinary shares
(share options) taking into account their exercise price in comparison with
the actual average share price during the year.
10. SHARE CAPITAL
2023 2022
No. of shares Nominal No. of shares Nominal
000 Value 000 Value
£000 £000
Authorised
Ordinary shares of 25p each 40,000 10,000 40,000 10,000
Allotted, called up and fully paid
Ordinary shares of 25p each 22,955 5,739 22,340 5,585
During the year 111,181 shares (2022: 75,891) were issued with an aggregate
nominal value of £28,000 (2022: £19,000) and were fully paid up for
equivalent cash of £474,000 (2022: £459,000) to shareholders exercising
their right to receive dividends under the Company's dividend scrip scheme. A
further 503,534 (2022: 1,965,689) shares with a nominal value of £126,000
(2022: £491,000) were issued for an equivalent cash value of £997,000 (2022:
£10,581,000), with 503,534 (2022: 65,689) shares being to satisfy the
exercise of employee options. Of these employee option shares, 141,766 (2022:
Nil) were the result of the exercise of nil cost options under the Company's
Performance Share Plan, with the nominal value being credited from the
transfer of capital from the Equity Remuneration Reserve.
11. CASH AND CASH EQUIVALENTS, BORROWINGS AND LEASE LIABILITIES
2023 2022
£000 £000
Current
Cash and cash equivalents per balance sheet and cash flow 31,055 31,177
Bank loans and overdrafts due within one year or on demand:
Secured loans (1,897) (2,371)
Loanstock (unsecured) (698) (672)
Financial liabilities - borrowings (2,595) (3,043)
Net obligations under finance leases:
Non-property leases (2,658) (1,647)
Property leases (1,104) (1,697)
Lease liabilities (3,762) (3,344)
Total current net cash and lease liabilities 24,698 24,790
Non-current
Bank loans: Secured (4,743) (6,640)
Financial liabilities - borrowings (4,743) (6,640)
Net obligations under leases:
Non-property leases (2,049) (1,645)
Property leases (7,164) (2,354)
Lease liabilities (9,213) (3,999)
Total non-current net debt and lease liabilities (13,956) (10,639)
Total net cash and lease liabilities 10,742 14,151
Memo: total net cash and lease liabilities excluding property leases 19,010 18,202
• Cash and cash equivalents
Cash and cash equivalents are all non-restricted balances and are all cash at
bank and held with HSBC UK Bank Plc, except for £1,500,000 (2022:
£1,652,000) which is held at International FC Stones for wheat futures
hedging purposes. HSBC UK Bank Plc's credit rating per Moody's for long-term
deposits is Aa3 (2022: Aa3). £1,820,000 of the cash and cash equivalent
balances are denominated in foreign currencies, EUR (98%) and USD (2%) (2022:
£3,623,000, in EUR (99%) and USD (1%)). All other amounts are denominated in
GBP and are at booked fair value.
• Borrowings
Bank loans and overdrafts are secured by an unlimited composite guarantee of
all the trading entities within the Group. The outstanding bank loan of
£6,640,000 (2022: £9,011,000) is structured as a term facility with
quarterly repayments of £474,250. Interest on this loan is 1.75% over the
daily SONIA rate up to the point of repayment.
Loan stock is redeemable at par at the option of the Company or the holder.
Interest of 3.7% (2022: 1.5%) per annum is payable to the holders.
12. CASH GENERATED FROM OPERATIONS
2023 2022
£000 £000
Profits for the year from operations 6,928 17,142
Adjustments for:
Tax 1,776 3,982
Fair value movement in Investment property - 522
Depreciation of tangible fixed assets 2,312 2,289
Amortisation of right-of-use assets 4,189 4,086
Amortisation of other intangible fixed assets 210 154
(Profit) on disposal of property, plant and equipment (121) (132)
Loss / (Profit) on disposal of right-of-use asset 2 (86)
ESOP trust revaluation (31) -
Interest on lease liabilities 464 257
Net Interest expense 294 233
Share of post-tax results of joint ventures (673) (676)
Share-based payments 258 262
Derivative held at fair value 809 (627)
Hedge ineffectiveness (50) 104
Government grant (2) (2)
Net movement in provisions (345) (6)
Changes in working capital (excluding effects of acquisitions and disposals of
subsidiaries):
Decrease / (Increase) in inventories 16,592 (18,401)
Decrease / (Increase) in trade and other receivables 16,360 (18,467)
(Decrease) / Increase in payables (28,700) 23,205
Cash generated from operations 20,272 13,839
13. BUSINESS COMBINATIONS
Tamar Milling Limited
On 16 November 2022, Wynnstay Agricultural Supplies entered a business
combination and acquired 100% of the shares of Tamar Milling Limited. The
provisional consideration is £1,746,000 inclusive of cash and cash
equivalents of £32,000.
Current Non- Current Total
£000 £000 £000
Trade receivables net of loss allowance 1,015 - 1,015
Other receivables 45 - 45
Inventories 953 - 953
Cash and cash equivalents 32 - 32
Trade payables (722) - (722)
Other payables (292) - (292)
Lease liabilities (140) (313) (453)
Deferred tax - (119) (119)
Net Current Assets and Non-Current Liabilities 891 (432) 459
Tangible fixed assets - 787 787
Underlying Net Assets of Acquiree 891 355 1,246
The provisional consideration payable is dependent on future product volumes
and profitability of the commercial business acquired. The fair value of the
contingent consideration has been based on management's expectation of the
future performance of the business and that could range from £Nil to
£100,000.
A full analysis of the provisional consideration is provided in the table
below. The goodwill balance represents the assembled workforce and future
sales opportunities and is not expected to be deductible for tax purposes.
Fair Value of Net Assets Acquired Adjustment Fair Value of Net Assets
£'000 £'000 £'000
Fair value of net assets acquired
Goodwill - 302 302
Intangibles - customer accounts - 234 234
Property, plant and equipment 263 - 263
ROU Assets 524 - 524
Inventories 953 - 953
Trade receivables 1,015 - 1,015
Other receivables 45 - 45
Cash and cash equivalents 32 - 32
Trade payables (722) - (722)
Other payables (292) - (292)
Lease liabilities (453) - (453)
Deferred tax (119) (36) (155)
Net Assets 1,246 500 1,746
Acquisition date- fair value of the total net assets acquired 1,746
Representing:
Cash settled to vendor during the period 1,646
Deferred consideration outstanding at 100
31 October 2023
Provisional Consideration 1,746
Cash Flow Statement:
Cash settled to vendor during the period 1,646
Less cash and cash equivalents acquired (32)
Cash settled to vendor during the period for prior acquisitions 1,095
2,709
Subsequent to the year-end, a first instalment of the deferred consideration
shown in the table above was paid to the vendors in the sum of £37,000 in
January 2024. Directly attributable acquisition costs of £28,000 were
incurred with the transaction, and these have been recognised as non-recurring
expenses in the income statement for the period. During the last available
audited accounts of the acquired entity, for the period to September 2021, the
annual aggregate revenues on a non-consolidated basis amounted to £6,397,000
and profit before tax was £422,000. Business combination accounting is
expected to be finalised within 12 months from the completion date of the
acquisition. Amounts included in the Consolidated Statement of Comprehensive
Income period to October 2023 in relation to the acquired business are
revenues of £7,430,000 and profit before tax of £110,000.
Contingent and deferred consideration of £1,095,000 was paid during the
period to 31 October 2023 relating to other prior period acquisitions,
resulting in a total gross cash outflow of £2,741,000 or £2,709,000 net of
cash acquired with the Tamar Milling transaction.
In February 2023, the contingent consideration relating to the acquisition of
Humphrey Poultry (Holdings) Limited was settled in the sum of £1,095,000.
This value was less than the provisionally assessed contingent consideration
of £2,000,000, primarily as a result of a change in anticipated trading
conditions created in part by the impact of Avian Influenza on poultry
flocks. As the timing of the recognition of this change was within the
maximum twelve month period permitted under IFRS 3 for finalising the business
combination accounting relating to this transaction, the adjustment to the
provisionally assessed value of the contingent consideration and the settled
amount, has resulted in a reduction in the acquired value of goodwill of
£905,000.
14. ALTERNATIVE PERFORMANCE MEASURES
The Board of Directors consider that the following Alternative Performance
Measures provide useful information for shareholders on underlying trends
and performance:
· Adjusted Operating Profit
· Underlying Profit Before Tax
· Adjusted EBITDA
The Board believes these Alternative Performance Measures reflect the
underlying commercial performance of the current trading activities and
provide investors and other users of the accounts with an improved view of
likely future performance. The rationale behind making adjustments to the
IFRS results is as follows:
· The add back of tax incurred by joint ventures and associates.
The Board believes the incorporation of the gross result of these entities
provides a fuller understanding of their combined contribution to the Group
performance.
· The add back of share-based payments. This charge is a calculated
using a standard valuation model, with the assessed non-cash cost each year
varying depending on new scheme invitations and the number of leavers from
live schemes. These variables can create a volatile non-cash charge to the
income statement, which is not directly connected to the trading performance
of the business.
· Non-recurring items. The Group's accounting policies include the
separate identification of non-recurring material items on the face of the
income statement, which the Board believes could cause a misinterpretation of
trading performance if not disclosed. An analysis of these charges is given in
Note 5 to the accounts.
A reconciliation of reported IFRS results to Alternative Performance Measures
is shown below:
Adjusted Operating Profit
Adjusted results are after adding back amortisation of acquired intangible
assets, goodwill impairment, share-based payment expense and non-recurring
items.
2023 2022
£'000s £'000s
Operating profit 8,789 20,938
Amortisation of acquired intangibles 210 154
Share based payments 258 262
Non-recurring items 82 1,094
Adjusted Operating Profit 9,339 22,448
Underlying Profit Before Tax
Adjusted results which includes the gross share of results from joint ventures
are after adding back share-based payment expense and non-recurring items.
2023 2022
£'000s £'000s
Profit before tax 8,704 21,124
Share of tax incurred by joint ventures & associates 192 132
Share based payments 258 262
Non-recurring items 82 1,094
Underlying profit before tax 9,236 22,612
Adjusted EBITDA
Defined as earnings before interest, tax, depreciation and amortisation, and
investment property fair value adjustment, tax on joint ventures, goodwill
impairment, share-based payment expenses and other non-cash charges.
2023 2022
£'000s £'000s
IFRS reported pre-tax profit 8,704 21,124
Investment property fair value adjustment - 522
Tax on joint venture & associate income 192 132
Net profit on disposal of assets (119) (218)
Interest 758 490
Depreciation and ROU amortisation 6,501 6,375
Intangible amortisation and share based payment expense 468 416
Other non-cash charges 381 (531)
Adjusted EBITDA 16,885 28,310
Property lease payments (2,502) (2,281)
Adjusted EBITDA after operating lease payments 14,383 26,029
15. RESPONSIBILITY STATEMENT
The Directors below confirm to the best of their knowledge:
· the financial statements, prepared in accordance with the applicable set of
accounting standards, give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Company and the undertakings
included in the consolidation taken as a whole; and
· the management report includes a fair review of the development and
performance of the business and the position of the issuer and the
undertakings included in the consolidation taken as a whole, together with a
description of the principal risks and uncertainties that they face.
S J Ellwood
S D Esom
R J Thomas
G W Davies
H J Richards
C A Bradshaw
16. CONTENT OF THIS REPORT
The information in this announcement has been extracted from the audited
statutory financial statements for the year ended 31 October 2023 and as such,
does not constitute statutory financial statements within the meaning of
section 435 of the Companies Act 2006 as it does not contain all the
information required to be disclosed in the financial statements prepared in
accordance with UK-adopted International Accounting Standards.
Statutory accounts for 2022 have been delivered to the Registrar of
Companies. The auditor, RSM UK Audit LLP, has reported on the 2022 accounts;
the report (i) was unqualified, (ii) did not include a reference to any
matters to which the auditor drew attention by way of emphasis without
qualifying their report, and (iii) did not contain a statement under section
498(2) or (3) of the Companies Act 2006.
The statutory accounts for 2023 will be delivered to the Registrar of
Companies following the Annual General Meeting. The auditor, Crowe U.K. LLP,
has reported on these accounts; their report is unqualified, does not include
a reference to any matters to which the auditor drew attention by way of
emphasis without qualifying their report, and; does not include a statement
under either section 498(2) or (3) of the Companies Act 2006.
The Annual Report and full Financial Statements will be available to
shareholders during February 2024. Further copies will be available to the
public, free of charge, from the Company's Registered Office at Eagle House,
Llansantffraid, Powys, SY22 6AQ or on the Company's website at
www.wynnstay.co.uk.
17. ANNUAL GENERAL MEETING
The Annual General Meeting of the Company will be held on Tuesday 26 March
2024 at 11.45am in the Sovereign Suite at Shrewsbury Town Football Club,
Oteley Road, Shrewsbury, Shropshire, SY2 6ST. Further details will be
published on the Company's website www.wynnstayplc.co.uk.
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